How has the social component of environmental, social, and governance (ESG) evolved in the past five years? Against the backdrop of the pandemic, ongoing social inequalities, international conflict, economic uncertainties, and environmental threats, Chief Executives for Corporate Purpose’s (CECP) 2023 brief, Global Impact at Scale: The S in ESG examines this question.
Companies are increasingly compelled by public expectation to adopt corporate responsibility measures that contribute to business value as well as a more equitable and sustainable future. The 2023 brief responds to CECP’s Global Exchange (GX) partners’ requests for insight into the global opportunities and challenges around the social dimension of ESG. This dimension underpins companies’ responsibilities to their employees, communities and broader society.
The brief explores the subject through the lenses of employee engagement; diversity, equity and inclusion (DEI); and customers.
Employment is about more than money
The modern workforce is interested in what employers can offer beyond salaries and benefits. Increasingly, employees seek purpose, meaning and shared values from their workplaces, placing the onus on employers to provide these.
While global voluntary turnover rates are low, so too is employee engagement rates. Burnt out employees feel forced to stay in jobs they might rather leave because of economic necessity and uncertainty.
Companies hoping to attract and retain top-tier skills and a satisfied and productive workforce need to foster environments that offer employees a sense of purpose and prioritise wellness and mental wellbeing.
The CECP brief cites the First HP Work Relationship Index for insight into what employees are seeking from employers. These include:
- The sense of fulfilment that comes from purpose, meaning and empowerment at work.
- Empathetic and emotionally intelligent leadership.
- Decision making that places people at its centre.
- Opportunities to acquire more skills.
- Technology that supports employee engagement.
- Workspace flexibility and trust, supported by seamless transitions.
Companies must prioritise diversity, equity and inclusivity
The brief identifies DEI as essential elements for successful contemporary business strategies. Companies that embrace the various dimensions of diversity demonstrate improved profitability and greater adaptability. They are more likely to attract top talent and serve multiple customer bases.
While implementation of DEI varies according to culture, religion, legal systems, historical contexts and social structures, corporate commitment to DEI should not be overlooked. In addition to employees valuing such efforts, DEI programmes have a big impact on external organisations and small businesses.
DEI and employee engagement play an important role in influencing a company’s ESG performance. There is a correlation between higher percentages of women on boards and stronger governance performance with the Fortune 500®, whichdemonstrates the importance of demographic diversity. This promotes cognitive diversity, alleviates collective conformity and improves decision making.
Consumers value integrity and sustainability
The CECP brief highlights the trend in which investors and customers increasingly advocate for ethical and sustainable business practices. Consumer interest in company investment and decision making is forcing companies to consider more than profit margins and adopt practices that match their consumer base’s values.
A key area of growth is cybersecurity. Rises in cyberattacks and the financial consequences of data breaches are driving companies to invest in preventative measures, cybersecurity and incident response capabilities. Protecting both companies and customer data is a growing priority.
Corporate social responsibility (CSR) has a potentially important role to play in demonstrating corporate value to consumers. The CECP brief cites research out of Europe that demonstrates how CSR activities reduce costs through more efficient resource consumption and more motivated and efficient human capital. CSR also boost revenues by improving customer loyalty, revealing niche markets and reducing financing costs.
As companies continue to navigate the complexities of the global landscape, they have a responsibility to reaffirm their commitment to communities, stakeholders and employees. Instead of viewing the growing push for corporate integrity as a burden, companies might rather view it as an opportunity to make a meaningful difference towards a more sustainable and equitable future.
Trialogue is CECP’s GX Partner and contributed original research to the report.
Access the report: Global Impact at Scale: The S in ESG – 2023.